B2B Marketing

UNIT III – Part 2

The meaning of value in business markets
• When members of a buying center select a product, they are
buying a given level of product quality, technical service, and
delivery reliability
• Other elements may be important—the reputation of the
supplier, a feeling of security, friendship, and other personal
benefits flowing from the buyer-seller relationship.
• Value represents a trade-off between benefits and sacrifices
• Customer value, then, represents a business customer’s
overall assessment of the utility of a relationship with a
supplier based on benefits received and sacrifices made
CUSTOMER VALUE IN BUSINESS MARKETS
• Benefits
• Core benefits are the basic requirements the business marketer
must meet to be included in the customer’s consideration set.
• Represented here would be a specific level of product quality
and performance, as well as expected levels of pre and post
sales service
• Add-on benefits are those “attributes, typically not required,
that assist the customer in selecting a supplier from among a
qualified set of potential Suppliers”
• These are relational characteristics or services that differentiate
suppliers and focus on “attractor” attributes in buyer-seller
relationships
• Examples of add-on benefits would be joint working
relationships in product development, quality control, logistics,
and delivery systems
• Sacrifices
• A broad perspective is likewise needed in
examining the sacrifices, or costs, a particular
alternative may present for the buyer
• When purchasing a product or service, a
business customer always assumes various costs
above and beyond the actual purchase price
• Rather than making a decision on the basis of
price alone, organizational buyers emphasize the
total cost in use of a particular product or service
Customers’ cost-in-use components
• Acquisition costs include not only the selling
price and transportation costs but also the
administrative costs of evaluating suppliers,
expediting orders, and correcting errors in
shipments or delivery.
• Possession costs include financing, storage,
inspection, taxes, insurance, and other internal
handling costs.
• Usage costs are those associated with ongoing
use of the purchased product such as installation,
employee training, user labor, and field repair, as
well as product replacement and disposal costs
 Value-Based Strategies
• Aided by sophisticated supplier evaluation systems, buyers can measure
and track the total cost/value of dealing with alternative suppliers
• In turn, astute business marketers can pursue value-based strategies
that provide customers with a lower cost-in-use solution
• For example, the logistical expenses of health-care supplies typically
account for 10 to 15 percent of a hospital’s operating costs
• Medical products firms, like Becton, Dickinson and Company, develop
innovative product/service packages that respond to each component
of the cost-in-use equation
• Such firms can reduce a hospital’s acquisition costs by offering an
electronic ordering system, possession costs by emphasizing just-in-
time service, and usage costs by creating an efficient system for
disposing of medical supplies after use.
• Differentiating Through Value Creation Value-
based strategies seek to move the selling
proposition from one that centers on current
prices and individual transactions to a longer-
term relationship built around value and lower
total cost in use.
• Importantly, recent research suggests that
benefits have a greater effect on perceived
value to business customers than sacrifices
(price and costs).
Key components of the price-setting decision
process
A value-based approach for pricing
 The Product Portfolio Management Discipline: 3
Dimensions That Make You More Market-Driven
• A product portfolio management discipline in
B2B is more about your portfolio’s alignment to
customer goals than it is to your own revenue
and profitability goals.
• Why? If you’re going to be a market-driven
organization, everything needs to be aligned
with the business goals of your target
customers to ensure there’s a common focal
point that’s meaningful across product,
marketing and sales teams.
1. Individuals That Manage Products to Protect
Recurring Revenue Streams
• Priority one is preserving the recurring revenue
streams from existing customers.
• Most incremental product enhancements that retain
customers don’t do much to spur new growth because
they’re not solving significant new problems
• They’re simply solving existing problems better.
 Additionally, those who don’t use your product aren’t
aware of these minor shortcomings
• It’s perfectly OK.  Invest in each product accordingly.
Those recurring revenue streams will fund the new
solutions.
2. Teams That Deliver High-Value Solutions to Drive Growth
• Uncovering the big-bang needs is arguably the easiest,
most fun and most rewarding part of the product
portfolio management discipline, but it requires a slightly
different organization structure to uncover and solve
problems that have strategic value to the C-suite.
• Then there’s the execution of projects that drive a series
of coordinated enhancements across multiple products
to deliver the integrated solutions
• Multi-product solutions are your growth engine!  If
you’re going to apply more focus here, you’ll need
to reallocate headcount in product management to
ensure a full-time focus on uncovering bigger problems.
3. A Portfolio Strategy That Mirrors the Business Goals
of Your Target Customers
• Conventional wisdom says, “What shiny new things
can we build to drive growth?” Product portfolio
management wisdom begins with the customer and
ends with your growth and profitability goals — “How
can we help our target customers meet their strategic
business goals and use our portfolio of
products/services to grow profitably doing it?” 
• It’s a completely different mindset that results in
higher value products and solutions because
measurable customer outcomes are the focal point
for everything.
 B2B Distribution
• B2B channels – B2B Channels involve the
movement of goods from a business company
to a business company. In this type
of distribution channel, the movement might
happen from the business product
manufacturer to the end consumer. Or it may
happen from a distribution network which is
in between
B2B Distribution
 Types of Marketing Channels
• There are basically four types of marketing
channels:
• Direct selling;
• Selling through intermediaries;
• Dual distribution; and
• Reverse channels.
 B2B Distribution digitally
• The B2B customer buying journey has been forever
transformed by the Internet, and this has major
implications for Manufacturers, Brands, and
Distributors
• B2B selling channels have forever changed in the age
of the internet and mobile devices.
• Traditional selling models have shifted, and the
central communication point for business value
propositions has moved from physical to digital in
most industries.  
• Forrester Research reports says that as much
as 70% of the buying process is already
completed before the buyer even contacts a
potential supplier. 
• Product preferences and buying decisions are
determined via the web, with 90% of B2B
buyers using online search in their product
research process
• Somehow, this trend has caught many
manufacturers, brands, and distributors by
surprise.
• Most remain ten years or more behind where
they need to be in terms of digital
transformation.
• A clear call to action is being sounded by B2B
buyers (your customers) to meet expectations
for digital interaction, research, order support,
product service, and Ecommerce.
 What Has Changed?
• In the past, the B2B sales chain had three
steps (in its simplest form):
• Manufacturers and brands produced goods
• Resellers and wholesalers bought the goods in
bulk from manufacturers
• Business customers (the end users) bought
these goods from the stock of resellers and
wholesalers
• As an example, consider a repair shop in the
automotive industry. The shops servicing vehicles
are the final business buyer and customer.
• Manufacturers of automotive components would
produce aftermarket parts, which would be sold to
distributors with a local presence close to the
shops (often stocked by the distributor or available
on short notice from the manufacturer).  
• The repair shop then would order the parts from
the distributor when needed, and they would get
delivered quickly (usually within a few hours) to
the shop by a local delivery vehicle. 
• Well, traditional sales channels have evolved,
driven by changes in buyer behavior.  The
disintermediation of channels is the result.
• That auto repair shop is now using multiple ways
to research and buy their products, with digital
and Ecommerce at the center of it all.
• As perhaps the biggest sign of change (and
forthcoming disintermediation), Amazon recently
announced a move into the B2B automotive
aftermarkets industry, and the company is
expected to become a large player in this sector.
• Today’s B2B customers expect a broader
selection, faster delivery, and more product
information—all of which is accessible
through multiple devices (e.g., mobile,
desktop, mobile apps, marketplaces, and
other channels)
• They also expect to be able to buy the
products and services they need through
multiple channels, including:
• Marketplaces. Amazon is one of the major forces in here,
and, with Amazon Business, the company has added
significant business buyer features that will certainly impact
any industry they target.
• Ecommerce. Many businesses have enabled Ecommerce
functionality on their websites. This includes many
distributors, which are further ahead in this area than their
manufacturer and brand counterparts. 
• Manufacturers Going Direct. More and more manufacturers
are selling directly to the end customer via Ecommerce,
thereby bypassing distributors. Research by our friends at
Forrester suggests that customers are willing to pay 20%
more to buy directly from manufacturers. What’s more, 40%
of customers prefer buying from manufacturers who they
consider experts.
• Digitally-Enabled Sales Teams. Companies are
increasingly arming their sales teams with real time
information that is critical at the point of sale when
they are sitting with the customer – things like
instant inventory information, product specs and
compatibility details, instant ordering and delivery
timeframes, and other data
• This isn’t about replacing sales teams – it is about
empowering them to be more effective. We have
one client that is generating over $100 MM in annual
revenue from a mobile app used by the sales force
that provides instant product inventory information.
 Taking Advantage of Change
• Resellers’ roles may be diminishing. Leveraging
new distribution channels to sell directly to
your customers can drive competitive
advantage
• Deploy Ecommerce to sell Directly to end
customers – This allows you to enjoy higher
gross margins on your online sales (particularly
on repeat orders and less complex products).
• Embrace Marketplaces – Almost 60% of
online product searches start on Amazon.com.
• Get Digital Support for your Sales Team – Get
them the real time information they need to
be more effective in the field.
 Definition of Value Delivery Network
• The network of all direct industry participants involved in
the production, marketing, delivery, installation and
service of your organization's goods into specific
demographic and geographic markets.
• The process of adding value : Raw material suppliers,
processors, manufacturers, wholesalers, distributors and
retailers are all actively involved in the process of
converting raw-materials into finished goods, and through
the process of converting inputs into outputs each
participant adds actual or perceived value to each unit of
goods sold.
The benefits of integrating and synchronizing
your value delivery network
• Extracting a significant commercial benefit from your
customers by using competitive advantages that are external
to your organization through partnering with aligned value
delivery partners.

• Increasing the intensity of integration within a value-chain,

often leads to the lowering of the unit cost of production
through the incremental recovery of overhead costs, available
for research (to generate innovation) and technology (to
adapt automation) – core sources of competitive advantage.
• Alliances between value-chain participants often
lead to reduced transaction costs, through
eliminating intermediary margins and increasing
pricing transparency, providing your
organization with powerful leverage in supply
negotiations.

• Provides your organization with real time

information to be able to enhance inventory
management and employ JIT-manufacturing
practices to better match your production
(supply) with demand.
• Many organizations often partner with a
network of suppliers and distributors, and
increasingly R&D and marketing firms whose
collective competitive strengths, provide an
integrated and powerful path to market.